Convertible Senior Notes

9 Months Ended

Sep. 29, 2024

2025 Notes - On February 29, 2024, the Company entered into exchange agreements (the “Exchange Agreements”) with certain holders (the “Noteholders”) of its 5.00% Convertible Senior Notes due 2025 (the “2025 Notes”). The Exchange Agreements provided for the Company to deliver and pay at the closing of the transactions on March 5, 2024, an aggregate of approximately 7.5 million shares of its common stock and $3.3 million in cash, including accrued interest, in exchange for $83.6 million in aggregate principal amount of the Company’s outstanding 2025 Notes (the “2025 Notes Partial Repurchase”). In connection with the 2025 Notes Partial Repurchase, the Company recognized a loss on extinguishment of debt of $135.8 million and recorded a $216.1 million increase to Additional paid-in capital during the thirty-nine weeks ended September 29, 2024.

In connection with dividends paid during the thirty-nine weeks ended September 29, 2024, the conversion rate for the Company’s remaining 2025 Notes decreased to approximately $10.79 per share, which represents 92.643 shares of common stock per $1,000 principal amount of the 2025 Notes, or a total of approximately 1.920 million shares.

The following table includes the outstanding principal amount and carrying value of the 2025 Notes as of the periods indicated:


(dollars in thousands)	SEPTEMBER 29, 2024		DECEMBER 31, 2023
Principal	$	20,724	$	104,786
Less: unamortized debt issuance costs (1)	(97)		(1,138)
Net carrying amount	$	20,627	$	103,648

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(1)During the thirty-nine weeks ended September 29, 2024, the Company wrote off $0.8 million of debt issuance costs as a result of the 2025 Notes Partial Repurchase.

Following is a summary of interest expense for the 2025 Notes by component for the periods indicated:


	THIRTEEN WEEKS ENDED				THIRTY-NINE WEEKS ENDED
(dollars in thousands)	SEPTEMBER 29, 2024		SEPTEMBER 24, 2023		SEPTEMBER 29, 2024		SEPTEMBER 24, 2023
Coupon interest	$	259	$	1,310	$	1,524	$	3,932
Debt issuance cost amortization	41		201		239		594
Total interest expense (1)	$	300	$	1,511	$	1,763	$	4,526

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(1)The effective rate of the 2025 Notes over their expected life is 5.85%. The decrease in interest expense during the thirteen and thirty-nine weeks ended September 29, 2024 relates to the 2025 Notes Partial Repurchase in February 2024.

Based on the daily closing prices of the Company’s stock during the quarter ended September 29, 2024, the remaining holders of the 2025 Notes are eligible to convert their notes during the fourth quarter of 2024.

Convertible Note Hedge and Warrant Transactions - In connection with the 2025 Notes Partial Repurchase, on February 29, 2024, the Company entered into partial unwind agreements with certain financial institutions (the “Derivative Counterparties”) relating to a portion of the convertible note hedge transactions (the “Note Hedge Early Termination Agreements”) and a portion of the warrant transactions (the “Warrant Early Termination Agreements” and together with the Note Hedge Early Termination Agreements, the “Early Termination Agreements”) that were

previously entered into by the Company in connection with the issuance of the 2025 Notes. Pursuant to the Early Termination Agreements, the Derivative Counterparties made a termination payment to the Company which consisted of approximately $118.2 million in cash and 0.3 million shares of common stock, and the Company made a termination payment to the Derivative Counterparties in an aggregate amount of approximately $102.2 million in cash. In connection with the Note Hedge Early Termination Agreements and the Warrant Early Termination Agreements, the Company recorded a $126.5 million increase and a $102.2 million decrease, respectively, to Additional paid-in capital during the thirty-nine weeks ended September 29, 2024. The Company also recorded an $8.3 million increase to Accumulated deficit in connection with the Note Hedge Early Termination Agreements.

The remaining warrants have a dilutive effect on the Company’s common stock to the extent that the price of its common stock exceeds the strike price of the warrants. In connection with dividends paid during thirty-nine weeks ended September 29, 2024, the strike price for the remaining warrants decreased to $15.11.